Will advanced technology allow suppliers to charge people very small amounts for reading web sites, blogs, and other kinds of material? No, says Clay Shirky, mental transactions costs will remain. Here is his bottom line:
The people pushing micropayments believe that the dollar cost of goods is the thing most responsible for deflecting readers from buying content, and that a reduction in price to micropayment levels will allow creators to begin charging for their work without deflecting readers.
This strategy doesn’t work, because the act of buying anything, even if the price is very small, creates what Nick Szabo calls mental transaction costs, the energy required to decide whether something is worth buying or not, regardless of price.
Weblogs, in particular, represent a huge victory for voluntarily subsidized content. The weblog world is driven by a million creative people, driven to get the word out, willing to donate their work, and unhampered by the costs of xeroxing, ink, or postage. Given the choice of fame vs fortune, many people will prefer a large audience and no user fees to a small audience and tiny user fees. This is not to say that creators cannot be paid for their work, merely that mandatory user fees are far less effective than voluntary donations, sponsorship, or advertising.
Because information is hard to value in advance, for-fee content will almost invariably be sold on a subscription basis, rather than per piece, to smooth out the variability in value. Individual bits of content that are even moderately close in quality to what is available free, but wrapped in the mental transaction costs of micropayments, are doomed to be both obscure and unprofitable.
Publishers Weekly, Kirkus, Library Journal, and Booklist are among the first reviewers of most new books. They are not widely read but often they are treated as gospel by the publishing trade. Their evaluations determine how seriously a book is taken by other reviewers, by media, by bookstores, and by filmmakers looking for new script sources. Read this Slate piece on how these outlets work, and why the Internet is decreasing their influence.
The Italian railway system had fallen into a rather sad state during World War I, and it did improve a good deal during the 1920s, but Mussolini was disingenuous in taking credit for the changes: much of the repair work had been performed before Mussolini and the fascists came to power in 1922. More importantly (to the claim at hand), those who actually lived in Italy during the Mussolini era have borne testimony that the Italian railway’s legendary adherence to timetables was far more myth than reality.
It is a common economic puzzle why the prices for various events, such as Super Bowls and rock concerts, do not always clear the market. Why sell tickets cheaply, thereby allowing scalpers to buy them up and later resell them at higher prices, reaping the surplus for themselves?
Canadian Ticketmaster wondered the same, and now they are doing something about it. For many concerts they will auction off some tickets at market-clearing prices. Most groups, however, will auction off only a few of the best tickets, rather than all tickets.
One concert promoter had reservations about the scheme: “From a fan’s point of view, I don’t think this would be fair,” he said. “Obviously, everyone should have equal access to tickets, especially if you’re a fan that lines up overnight. It should be fair and equitable.” Comments of this kind show that either he or I, or perhaps both of us, do not understand this market very well.
Thanks for Eric Crampton for pointing the link out to me. And speaking of musical concerts, it is sad to report that Johnny Cash has died.
Read this piece from techcentralstation.com, on how much the poor love globalization.
Here is one money quote:
When asked if cultural imports are “good” for their respective countries, young people in particular seemed to respond favorably in the developing world. Eight-five percent of Russians, 65% of Bangladeshis, 89% of Guatemalans, 94% of Chinese, and even 60% of Egyptians aged 18-29 answered affirmatively.
Here is another:
Even when respondents in the developing world saw conditions in their own countries “getting worse,” a sizeable majority refused to blame globalization for their problems. In fact, of all the countries where a majority of respondents said conditions in their respective country were deteriorating, none showed a majority of respondents putting globalization at fault. The highest percentage blaming globalization came in Indonesia, at 44%. Most others were in the teens.
Furthermore the global poor like multinational corporations, by overwhelming margins, and don’t like anti-globalization protesters.
On corporate law and governance, check out the new Corporation Law and Economics, with occasional discussions of wine as well. Stephen Bainbridge, main blogger, is professor of law at UCLA.
I also learned of a blog on neuroeconomics. Neuroeconomics is a new “movement,” I would define it as trying to better understand economic choice by looking inside the individual brain. Neuroeconomists take the Austrian economists literally in viewing choice as a process. My colleagues Kevin McCabe and Dan Houser are central to this research, they spend much of their time with brain scanners, trying to see which parts of the brain are used for which kinds of economic decisions. Neuroeconomics is a new field, and spans the disciplines, which makes a blog especially useful.
If you read blogs, you probably already have made up your mind about Paul Krugman. When perusing his new The Great Unraveling: Losing Our Way in the New Century, I found myself continually reminded how smart he is, what a good writer he is, and how often he is right. He led the way in publicizing the fiscal irresponsibility of the current Bush administration. I disagree with his politics, but his points have enough force to make me squirm.
If you are wondering, the book is basically his New York Times columns.
I like him best when he stays away from his pet hobby horses. Krugman gets through his essays on Robert Mundell, and the Swedish economic boom — both tight and thought-provoking pieces — without once attacking George W. Bush or calling the Republicans evil.
But these days I can never forget the other Paul Krugman, the one who keeps free market and right-wing bloggers so busy. The Krugman of self-righteousness, sloppiness with the facts, and ad hominem attacks. The Krugman Truth Squad remains. There are many examples of this other Krugman, I was struck by one particular example, taken from Donald Luskin:
Paul Krugman, September 2, 2003:
“I admire the virtues of free markets as much as anyone.”
Now this could make a great party game. Let’s see, where do I begin…? How about, Paul Krugman, June 20, 1999:
“The question of how to keep demand adequate to make use of the capacity has become crucial. Depression economics is back. …in a world where there is often not enough demand to go around, the case for free markets is a hard case to make.”
My take: Well, I guess it depends on what you mean by “as anyone.”
Addendum: Perusing the book more, I find Krugman (p.27) also writes: “I like the theory of efficient financial markets as much as anyone.” Four pages later, he writes, from a different column: “The more I look at the amazing rise of the U.S. stock market, the more I become convinced that we are looking at a mammoth psychological problem.” He also writes of “Seven Habits of Highly Defective Investors” (p.27) and calls them “an extremely dangerous flock of financial sheep.” (p.30)
“Portugal scrapped its initial estimate of 1,300 deaths and lowered it to just four,” from today’s cnn.com. Germany claims 40 heat-related deaths this summer.
The British claim 907 extra deaths across the span of a very hot week. Here are the Italians: “The Health Ministry said on Thursday 34,071 people over the age of 65 died between July 16 and August 15, compared with 29,896 in 2002 — a 14 percent increase.” French estimates range between 10,000 and 15,000 deaths.
How much of this was avoidable and how much was random movement in the numbers? In net terms, how many people actually died prematurely?
Consider the stability of mortality statistics. I checked the UK Office of National Statistics tables, for England and Wales, and was surprised how much death rates bounce around (at the link you need to go through some work to create the file in readable form, follow the instructions).
Take deaths over the time period 1985-2001. Rounding off the figures to the thousands, the median change in death numbers, from one year to the next, is 9,000 (the totals run from 530,000 to 590,000 deaths per year). The biggest change we see across a year is about 25,000. We shouldn’t expect those changes to be distributed perfectly evenly across the months. But if we divide by 12 “naively,” it would be very common for death tallies, on a monthly basis, to change by 700 to 800 people, when comparing one year’s August to the previous year’s August.
Now let us go back to the British figure. If the number of deaths jumps in a single week by 907, compared to an average change, this is out of the ordinary but not unthinkable. On the other hand, random noise plays a very small relative role when the monthly death rate jumps from 10,000 to 15,000.
These people all would have died anyway, the next question is when. Twelve months from now, will the yearly death rate stand above its average or will we now see fewer deaths for a while? To what extent did the heat redistribute deaths from September and October to August? (Eli Lehrer raises the further interesting question of whether some of these people died through a psychological effect, given that the media were reporting that a “heat death time” was upon us.)
Note that the richer and more technologically advanced a society, the fewer heat wave deaths we should expect, read here and here. For one thing, richer people are more likely to buy air conditioners. Everyone points the finger at negligent children, or the French hospital systems or August vacations. We can also blame the sluggish economic growth rates of the Continent. Social welfare states can be quite inhumane, once we examine secondary consequences.
The bottom line: something very bad did happen in France and Italy.
Something less bad happened in Britain. But we still have not gotten to the bottom of how bad or why.
Cronyism appears to be a problem with book reviews. After all, why would a busy reviewer take on a project, if not to butter up a potential ally or score points against an enemy? Some reviewers simply love being part of the cultural conversation, but you can’t always trust their evaluations. Read Mary Gannon on www.aldaily.com. But is the problem growing worse? Oliver Goldsmith and Alexander Pope leveled the same charge against cliquish eighteenth century English literary circles (see my In Praise of Commercial Culture for more discussion).
Accusations of media bias are common but are typically based upon nothing more than subjective standards and anecdote. A brilliant new paper by Tim Groseclose (GSB Stanford, currently visiting GMU) and Jeff Milyo (U. Chicago, Harris School) pioneers a more promising approach. Since 1947, the interest group Americans for Democratic Action (ADA) has tracked how Senators and Represenatives vote on key issues and they have used these votes to rank politicians according to their liberalism. In the 2002 session, for example Ted Kennedy received an ADA score of 100 and Phil Gramm a score of 0. Political scientists are familiar with ADA scores and have come to rely on them as a measure of ideology.
Groseclose and Milyo have found a way to compute ADA scores for media outlets as if they were politicians. What they did was to examine the Congressional Record for every instance in which a politician cited a think tank. They then did the same thing for newspapers, network news shows and other media outlets. By matching newspapers with politicians who had similar citation records they can impute an ADA score for the media outlet. Joe Lieberman, for example, has an ADA score of 66.3. Suppose that in his speeches he cites the Brookings Institution twice as much as the Heritage Institute. If the New York Times has a similar citation style then the New York Times is assigned an ADA score of 66.3. (The method is slightly more complicated than this but this gives the right idea.) Note that Groseclose and Milyo do not have to determine whether the Brookings Institution is more liberal than the Heritage Institute all they need to know is that the Times has a similar citation style to Lieberman.
Ok, what were the results? It turns out that all of the major media outlets, with the exception of Fox News: Special Report are considerably more liberal than the median member of the House over the 1993-1999 period. Moreover, although Fox News: Special Report was to the right of the median house member it was closer to the median member than were most of the other media outlets. (Interestingly, all of the liberal media outlets were less liberal than the average Democrat and Fox News is less conservative than the average Republican – thus there is a sense in which all media outlets are less biased than is the typical politician.) Here are the ADA scores of various media outlets along with some comparable politicians.
Joe Lieberman (D-Ct.) 66.3
New York Times 64.6
CBS Evening News 64.5
USA Today 62.6
NBC Nightly News 62.5
Los Angeles Times 58.4
Ernst Hollings (D-SC) 56.1
ABC World News Tonight 54.8
Drudge Report 44.1
Arlen Spector (R-PA) 44.0
House Median 39.0
Senate Median 36.9
Olympia Snowe (R-Me) 36.0
Charlie Stenholm (D-Tex) 29.3
Fox News Special Report 26.4
Tennyson is a poet I have come to relatively late in life, but I find increasing resonance in his works. As 9/11 is upon us, I would like to offer the following in remembrance:
Tears, Idle Tears
Tears, idle tears, I know not what they mean,
Tears from the depth of some divine despair
Rise in the heart, and gather to the eyes,
In looking on the happy Autumn-fields,
And thinking of the days that are no more.
Fresh as the first beam glittering on a sail,
That brings our friends up from the underworld,
Sad as the last which reddens over one
That sinks with all we love below the verge;
So sad, so fresh, the days that are no more.
Ah, sad and strange as in dark summer dawns
The earliest pipe of half-awakened birds
To dying ears, when unto dying eyes
The casement slowly grows a glimmering square;
So sad, so strange, the days that are no more.
Dear as remembered kisses after death,
And sweet as those by hopeless fancy feigned
On lips that are for others; deep as love,
Deep as first love, and wild with all regret;
O Death in Life, the days that are no more.
The popular press has begun to mention Martin Feldstein as a possible successor to Alan Greenspan. The other listed candidates, Stanley Fischer and Larry Summers, probably do not have sufficient “right-wing credentials” to get the job. Feldstein offers some recent thoughts on monetary policy. He also endorsed the Bush tax cuts, arguably a sign that he is angling for the job. Feldstein tends to favor targeted fiscal incentives in lieu of traditional Keynesian remedies. Overall he commands the respect of his peers and has had significant administrative experience in building up the National Bureau of Economic Research. But it is hard to tell what kind of monetary policy he would pursue, and how strong an independent stance he could define, if he held the office.
The new (and excellent) culture blog www.2blowhards.com directs our attention toward “Movies for Entrepreneurs”, by www.startupgarden.com, which offers resources for the teaching of entrepreneurship. The six movies chosen, for having significant lessons for entrepreneurs, are the following: Groundhog Day, The Music Man, Ghostbusters, Run Lola Run, Jerry Maguire, and Mary Poppins. The link offers plenty of explanation for these choices. What about Tucker: The Man and his Dream, starring Jeff Bridges, about the revolution in automobile design? And read this for their take on Monty Python and entrepreneurship.
Here is the ever-insightful Brad DeLong on why the current productivity and employment data are so hard to understand. Read Brad here and here (a longer, more technical post) for more context. The key point is this: many companies are prospering, and increasing absolute output, even as they are laying off workers. The implied numbers for productivity increases, per remaining worker, are simply astounding.
This essay by the deceased Robert Nozick has a few years on it, but I never knew there was an on-line version. It is the best piece I know on why so many intellectuals oppose capitalism. See my earlier blog post on the inability of some researchers to find a single registered Republican within some departments of MIT and other universities (of course Republicans commonly fail capitalism but I suspect that is not the objection of the MIT faculty). With thanks to Cato, Newmarksdoor, and BrianMicklethwait.com.
Here is one excellent sentence of many:
“The intellectual wants the whole society to be a school writ large.”